Monthly Archives: August 2017

Labour and National Policies on the age of entitlement for NZ Super and resuming contributions to the NZ Super fund

LABOUR

A Labour Government will secure the future for New Zealand Superannuation so we can continue to provide superannuation to those retiring at age 65, says Leader of the Opposition Andrew Little.

We can continue to afford to leave the retirement age at 65; unlike National which wants to lift the age to 67.

“The argument to lift the age from 65 just doesn’t stack up. I’ve spent 20 years working with people who struggle to get to 65 now before they retire because of the physical nature of their work; that hasn’t changed”.

“I’m absolutely clear that there will be no change. A Labour Government I lead will keep the age of entitlement at 65 and we will re-start contributions to the New Zealand Superannuation Fund immediately.

“One of the first things a Labour-led Government will do is resume payments to the NZ Superannuation Fund, so we can secure its future. National’s failure to invest in the Fund puts the retirement plans of New Zealanders at risk.

“Despite finally running surpluses after years of trying, the Government says it won’t resume Super contributions until 2021/22 financial year, while promising tax cuts that will hand $400 million to the top 10 per cent of income earners.

“The value of the contributions not made by National during its period in office is nearly $14 billion. Currently the Fund is worth $33 billion. The NZ Super Fund estimates that, had contributions continued to be made, it would now be worth $52.6 billion.

“National has sold the future of New Zealand short by billions and billions. By the time National plans to finally resume contributions, a Labour Government will have doubled the size of the current fund to $63 billion.

“This will equate to $6,500 per person extra in the Fund by 2021/22 under Labour. More importantly, we can continue to afford to leave the retirement age at 65; unlike National which wants to lift the age to 67.

“The argument to lift the age from 65 just doesn’t stack up. I’ve spent 20 years working with people who struggle to get to 65 now before they retire because of the physical nature of their work; that hasn’t changed.

“I’m absolutely clear that there will be no change. A Labour Government I lead will keep the age of entitlement at 65 and we will re-start contributions to the New Zealand Superannuation Fund immediately.

“This election will provide a clear choice – only a Labour Government’s fresh approach will make the investments we need to secure the future for all New Zealanders,” says Andrew Little.

*Fresh from her elevation to Leader of the opposition Jacinda Ardern “I absolutely support the position that Andrew has, firmly staking in the ground that we support keeping the age where it is.”The argument that I always made was about making sure there was affordability.”

Ms  Ardern said a bigger issue was resuming contributions to the New Zealand Superannuation Fund.” Bill English has not done that… and he’s essentially said that it’s my generation that’s going to pick up the tab.”

NATIONAL

 

Prime Minister Bill English today announced the National Party will go into the election with a responsible policy of lifting the age of entitlement for NZ Super from 65 to 67 starting in 20 years’ time.

Under our policy, the age of entitlement for NZ Super increases by six months each year from July 2037 until it reaches 67 in July 2040.

This means everyone born on or after 1 January 1974 will be eligible for NZ Super from age 67.

Other settings such as indexing NZ Super to the average wage and universal entitlement without means testing will remain unchanged.

National’s policy also proposes doubling the residency requirements for NZ Super to ensure applicants have lived in New Zealand for 20 years, with five of those after the age of 50.

People who are already citizens or residents will remain eligible under the existing rules.

National has chosen 67 because increases in life expectancy mean somebody retiring at 67 in 2041 will spend on average almost a quarter of their lives receiving superannuation, which is the same as someone who retires at 65 today.

While New Zealand has a more affordable scheme than most other countries, our greater life expectancy, while positive, is driving up the cost of NZ Super.

Without making changes, future trade-offs – such as restricting spending increases in areas like health and education or increasing taxes – would be necessary.

Under our changes to the age of eligibility and residency requirements, we expect to save New Zealand taxpayers in excess of 0.6 per cent of GDP or $4 billion annually once the changes are fully in place in 2041.

National’s NZ Super plan ensures the sustainability of the NZ Super Scheme in the long term and provides assurances for generations of hard-working New Zealanders.

It’s the right and responsible thing to do to secure New Zealand’s future.

Key information:

  • National intends to increase the age of entitlement for NZ Super by six months each year from July 2037 until it reaches 67 in July 2040. This means everyone born on or after 1 January 1974 will be eligible for NZ Super from age 67.
  • Other settings such as indexing NZ Super to the average wage and universal entitlement without means testing will remain unchanged; and the age that KiwiSaver funds can be accessed will remain at 65.
  • National is also proposing to double the residency requirements for NZ Super so that applicants must have lived in New Zealand for 20 years, with five of those after the age of 50. People who are already citizens or residents will remain eligible under the existing rules.
  • Posted by Alec Waugh

Treasury Regulatory paper! NZ Super

Comment on this paper below by Tony Alexander BNZ, Weekly Overview 3 August 2017

I took a look at the paper to try and gain some insight into a couple of factors relevant to the long term sustainability of the NZ super scheme. One is Treasury’s assumption about net average annual migration flows. They use 12,000. That seems much too low considering that over the past ten years the flow has average almost 25,000 per annum and before that 11,000 per annum. A higher average flow will mean more employees able to make tax payments supporting NZ Superannuation flows because migrants tend to be working and tend to be young. I also wanted to see how they factored in a rise in the proportion of people 65 years of age and over remaining in paid employment – therefore delivering more tax into government coffers. But it is not clear that this proportion is assumed to rise above the near 24% recently achieved – from less than 6% in 1998. This means the actual rise in the after-tax cost of NZS measured as a % of GDP could be less than the projected 4+% now to just over 7% come 2060. The current OECD average is about 8%. The proportion of NZ’s population projected to be 65 and over come 2060 is 27 from 15% currently. For your guide here are the current ratios in some other countries. % Australia 15 Denmark 21 Finland 21 Germany 21 Greece 22 Italy 23 Japan 27 New Zealand 15 Portugal 21 Spain 19 United Kingdom 18 USA 15 http://data.worldbank.org/indicator/SP.POP.65UP

http://www.treasury.govt.nz/publications/informationreleases/superannuation/sup-3753731.pdf